The Mexican peso climbed Thursday after the country's central bank hiked its key interest rate to a peak not seen in nine years.

The peso was up 0.85% versus the dollar at 2:45 p.m. ET.

Banco de Mexico raised its main rate by 25 basis points to 7.75%, the highest its been since 2009. Most economists had expected the central bank to hike, with only four of 22 economists polled by Reuters predicting it would hold rates steady.

The move comes amid Mexico's presidential race, where leftist candidate Andres Manuel Lopez Obrador is holding a double-digit lead. Rafael Elias of Exotix Capital said it's likely the peso has priced in the "near certainty of an AMLO victory."

"Most importantly, however, we expect a period of heightened volatility in Mexico between AMLO's likely election victory on 1 July and inauguration day on 1 December, since it will be during that period that investors will get to know AMLO's likely cabinet," Elias said.

Stalling NAFTA negotiations and a dollar rally have also been weighing on the peso, which has shed more than 9% versus the greenback since March.

It is unclear what Banco de Mexico's future policy moves will be. Nick Shearing, chief emerging markets economist at Capital Economics, said uncertainty around what the central bank will do next is "unusually high."

"Our base case is that today's hike is a one-off," Shearing said. "But that requires the peso to emerge relatively unscathed from next month's elections and for Nafta talks to regain some momentum over the second half of this year."

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